Wall Street, Chinese stocks take a tumble

NEW YORK – Stocks plunged Tuesday, hurtling the Dow Jones industrials down more than 220 points as Wall Street joined a global market decline sparked by growing concerns that the U.S. and Chinese economies are cooling and that equities prices have become overinflated.\nA 9 percent slide in Chinese stocks, which came a day after investors sent Shanghai’s benchmark index to a record high close, set the tone for U.S. trading.\nInvestors’ confidence was knocked down further by data showing that the economy may be decelerating more than anticipated. A Commerce Department report that orders for durable goods in January dropped by the largest amount in three months exacerbated jitters about the direction of the U.S. economy, which were raised a day earlier when former Federal Reserve Chairman Alan Greenspan said the United States may be headed for a recession.\n“It looks more and more like the economy is a slow growth economy,” said Michael Strauss, chief economist at Commonfund. “Moderate economic growth is good – an abrupt stop in economic growth scares people.”\nThe market had been expecting the government on Wednesday to revise its estimate of fourth-quarter gross domestic product growth down to an annual rate of about 2.3 percent from an initial forecast of 3.5 percent, and grew increasingly nervous on Tuesday that the figure could come in even lower.\nThe housing market, which the Street had been hoping had bottomed out, also looked far from recovery after a Standard & Poor’s index indicated that single-family home prices across the nation were flat in December. A later report from the National Association of Realtors said existing home sales climbed in January by the largest amount in two years, but the data didn’t erase housing-related concerns, as median home prices fell for a sixth straight month.\nIn midafternoon trading, the Dow Jones industrial average dropped 221.99, or 1.76 percent, to 12,410.27. The last time the index saw a one-day decline of more than 200 points was May 17, 2006. The Dow is now nearly 3 percent below its record high close of 12,786.64, reached just a week ago.\nBroader stock indicators also fell sharply. The Standard & Poor’s 500 index plummeted 33.62, or 2.32 percent, at 1,415.75, and the Nasdaq composite index dropped 72.44, or 2.89 percent, at 2,432.08.\nChina’s stock market plummeted Tuesday from record highs as investors took profits when concerns arose that the Chinese government may try to temper its ballooning economy by raising interest rates again or reducing more of the money available for lending.\n“Corrections usually happen because of a catalyst, and this may be it,” said Ed Peters, chief investment officer at PanAgora Asset Management. “The move in China was a surprise, and when a major market has a shock it ripples through the rest of the market. With all the trade that goes on with China, there tends to be a knee-jerk reaction with that kind of drop.”\nThe Shanghai Composite Index tumbled 8.8 percent to close at 2,771.79, its biggest decline since it fell 8.9 percent on Feb. 18, 1997. Since Chinese share prices doubled last year as investors poured money into the market after the completion of shareholding reforms, trading in Shanghai has been very volatile.